Chevron Corp and Hess Corp, two major players in the oil industry, are preparing for a crucial review of their planned merger by the U.S. Federal Trade Commission (FTC) expected in the third quarter of this year. Originally set to close in the first half of 2024, the $53-billion deal hit a roadblock when Exxon Mobil filed for arbitration in March. Exxon claims a right of first refusal over Hess’ valuable assets in Guyana, which has significantly delayed the merger process.
Hess remains optimistic about resolving the arbitration by the end of this year. “The arbitration is moving forward, and we hope to have a decision by late 2024,” Hess noted. However, Exxon has hinted that the arbitration proceedings could extend into 2025.
The arbitration centers on Exxon’s claim to purchase Hess’ 30% stake in Guyana’s Stabroek block, where Exxon holds a 45% stake and China’s CNOOC Ltd holds 25%. Together, they plan to double production to 1.3 million barrels per day by 2027, underscoring the importance of these assets.
A three-member arbitration panel is expected to schedule proceedings soon, marking a critical phase in this corporate dispute. Bloomberg News reported that the FTC intends to postpone its decision on whether to block Chevron’s acquisition until after the arbitration, potentially extending into the fourth quarter, according to anonymous sources. This regulatory delay highlights the complexities of major oil mergers in today’s market.
The outcome of this merger and arbitration will not only affect Chevron and Hess but also set a precedent for future industry mergers. As the FTC review and arbitration continue, stakeholders across the energy sector will closely monitor developments. Analysts anticipate significant implications for the global oil production landscape.
photo source: Google
By: Montel Kamau
Serrari Financial Analyst
12th July, 2024
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